Global dividends surpass $US1 trillion for first time

Australia paid out $US40.3 billion in dividends last year, a 10.2 per cent gain on the previous year, and placing the country ahead of Canada ($US38.5 billion), Germany ($US36.4 billion) and gaining ground on Japan ($US46.4 billion).
Photo: Fairfax

by
Vesna Poljak

The global dividend pool has exceeded $US1 trillion ($1.11 trillion) for the first time as companies respond to shareholders’ demands for income, underscoring the seemingly insatiable thirst for dividends triggered by ultra-stimulatory monetary policy.

However, 2013 also represents the slowest growth for dividends in the post-crisis era. Last year, dividends rose 2.8 per cent as US companies began dropping payouts in the fourth quarter. That’s when the US Federal Reserve confirmed it would taper the pace of its bond-buying program in the first step to unwinding more than $US3 trillion of quantitative easing.

Global dividends reached $US1.03 trillion in calendar 2013, a record, representing a 43 per cent increase from 2009 according to research published by Henderson Global Investors. The Asia-Pacific region, where Australia is the dominant source of dividends ahead of Hong Kong, grew 79 per cent over the same period.

The depreciation of the Australian dollar late last year hurt Australia’s standing. Australia paid out $US40.3 billion in dividends last year, however that figure would have been higher in US dollar terms had the foreign exchange rate remained stable.

AFR
Henderson Global Investors

On an annual basis the Australia balance was up 10.2 per cent, ahead of Canada ($US38.5 billion), Germany ($US36.4 billion) and gaining ground on Japan ($US46.4 billion). Since 2009, Australia is up 89 per cent.

Related Quotes

Company Profile

Henderson chief executive Andrew Formica predicted the demand for income from equities would endure. “The search for income is more than just a response to rock bottom interest rates in recent years. It marks a generational shift as ageing populations must increasingly rely less on state pensions and more on their own savings to provide for retirement," Formica said in a statement on Monday.

“Not only that, but they will need to stay invested in equities much longer than in the past too. This demand for equity income is a trend we see continuing through 2014 and beyond."

The biggest contribution to the global pool by sector was financials, which paid out $US217.6 billion, representing annual growth of 14.2 per cent. Remarkably, “the top 10 largest payers accounted for almost $US1 in every $US10 of the global income pie", the report said. Royal Dutch Shell, Exxon Mobil, Apple, China Construction Bank and HSBC Holdings round out the top five.

Experts believe that the low rates environment has created a culture of “dividend Vikings". Citigroup research published earlier this month said Australian banks “remain the poster child for high dividend-yielding stocks in the developed markets space" and the Big Four alone paid out 78 per cent of their earnings as dividends the year ended June 30. Citigroup took the view that Sweden was the next Australia as Nordic banks have improved payouts to shareholders.